Thread by @BrianFeroldi

Why did I invest in $SDGR? (Thread)

Business model:

1⃣Software: 1,300+ customers - enables rapid discovery of new molecules for drug development & materials

2⃣Drug discover: >25 collab programs AND a wholly-owned pipeline

3⃣Equity in other biz

1⃣Software biz:

Use software to create new compounds

237 BILLION compounds explored in software in 1h 2020

Uses AI to drive faster, cheaper, higher quality molecules/drugs

35% rev growth in 1h 2020
82% gross margin
Top 20 pharma cos use software, average of 15 years

2⃣Drug discovery

Lots of drugs in development w/ partners

Milestone/royalty payments

2⃣Drug discovery

Using software to develop its own drugs, too

3⃣Equity

History of creating new companies and spinning off

Retain equity

3⃣History of success w/ equity

Co-founded Nimbus in 2009

Spun off, yet retained equity

In 2016, Nimbus sold a drug to Gilead Sciences for $1.2 billion

Financial:

Software profits fund R&D programs

Net loss only $17 MM 1H 2020, mostly due to huge growth in R&D spending

FCF -$16 MM in 1H 2020

~$631 MM in cash -- TONS of liquidity

Employees:

Half have PhDs

Good place to work

Ownership:

Bill & Melinda Gates foundation 13%

D.E. Shaw 30%

CEO 1%

Co-Founder Richard Friesner 3%

Valuation:

Winner since IPO (+70%)

But down ~50% from July high

Valuation still high (39x sales), but high-quality companies deserve premiums

Risks:

Valuation still too high

Pipeline falls apart

Software growth slows to a crawl

I like the one-two-three punch here

Software biz is a high-quality asset that should continue to grow and pump out profits

Drug discovery & equity business provides TONS of optionality

Going to be a bumpy ride, but I bet this stock is higher in 2030 than it is today

Score on my checklist:

Financials: 8/17
Moat: 20/20
Potential: 17/18
Customers: 7/10
Revenue: 8/10
Mgmt/Culture: 10/14
Stock: 3/11
Gauntlet: 0

Total Score: 73 (investable)

85 possible in time

Recent presentation: ir.schrodinger.com/static-files/a…